Tag Archives: Mortgage

You want to buy a house and you’ve been trying to save the down payment for years. But something always gets in the way. Your car breaks down. Your eight-year-old needs braces. Rent keeps going up.

You’re beginning to think you’ll never own a home.

Think again.

Arizona has three great down payment assistance (DPA) programs for middle income borrowers. And they’re not just for first-time home buyers.
What is down payment assistance? Down payment assistance is a grant or a forgivable loan. Once you qualify for a first loan to buy a house, you receive the assistance money to pay the down payment and closing costs (prepaid taxes, home owners and mortgage insurance, and so on).

Two of the DPA programs are offered by the Arizona Department of Housing (ADOH) and the third by the Industrial Development Authority of the County of Maricopa (IDA). Note that the lender’s requirements may trump some of the assistance programs’ requirements based on the loan programs the buyer qualifies for.

Pathway to Purchase

The Pathway to Purchase program (P2P) helps home buyers in certain cities in Arizona put together a down payment. It works like this. You apply for a first loan through the Pathway program, which is a 30-year fixed-interest rate loan. Once you apply for the loan, you also receive a 2nd loan for the down payment and closing costs up to 10% of the purchase price with a max of $20,000. If the first loan is $100,000, for example, then the second loan will be $10,000. This second loan is forgivable—it has no payments and no interest, and after five years, it is forgiven.

There are a few stipulations. You can’t own another residential property at the time of close; your annual income can’t be more than $89,088; the purchase price can’t be more than $356,352; and your credit score must be 640 or greater.

If you are eligible for the Home Plus program, you can get up to 5% of the loan amount (not purchase price) for down payment assistance, depending on the type of loan you qualify for—and as much as 6% if you are qualified military personnel, such as a veteran, active duty military, active reservist, and active National Guard. This program is not available in Pima County, and with some types of loans, it is not available in Maricopa County.

As with the Pathway program, the first mortgage is a 30-year-fixed loan, with no minimum loan amount. Your income can’t be more than $89,088, the purchase price can’t be more than $356,352, and your credit score must be higher than 640. If your credit score is higher than 680, however, you’ll get a higher percentage of the maximum assistance.

Arizona Home In 5 Advantage Loan Program

The Industrial Development Authority offers the Home in Five program, which is strictly for homes purchased in Maricopa County. Home in Five provides down payment assistance up to 4% of the loan amount for eligible buyers and up to 5% for “hero” buyers: qualified military personnel, first responders, and teachers. The actual amount depends on the type of loan and the buyer’s credit score. The first loan is a 30-year-fixed interest rate loan.

This program has certain requirements as well. Your income can’t be more than $88,340, the purchase price can’t be more than $300,000, and your credit score should be at least 640—but the higher your credit score, the higher the assistance up to the program’s maximum.

What Do the Programs Have in Common?

In all three programs, the loans must be for purchases of owner-occupied, primary residences. They cannot be for refinance or new construction loans or for manufactured or mobile homes, and buyers cannot receive cash back after the loan closes. Each type of loan and each program have their own requirements about the type of property allowed: new or existing homes, single family, multi-unit, condos, townhomes, and so forth.

All programs require a DTI of 45%. DTI is debt-to-income ratio—your total monthly debts divided by your gross monthly income. If you have a $1,000 mortgage payment, $200 in credit card payments, and a $300 car payment, for example, and a $5,000 monthly income, your DTI is $1,000 + $200 + $300 / $5,000 = 30%.

In addition, to participate in these programs, you must take a homebuyer education course. Generally, you can take the course online, in person, or by phone.

Next Step

Give us a call to see which program is best for you. We’ll walk you through the process, find you the right program, and get you into a home before you know it.

Many of my clients are looking at the pros and cons of refinancing their current home loans due to rate and program changes in the past several years. There is potential to lower their rate or payment on their current mortgage. In the long run, refinancing can be very beneficial. There are many reasons why people will consider a refinance, so I will break it down into the top 4 reasons that I have had experience with.

Changing from an Adjustable Rate to a Fixed Rate Mortgage: Some homebuyers initially go for a low rate adjustable rate mortgage (ARM). This program allows for a fixed set interest rate for a period of time, typically 3, 5 or 7 years and when that time is up the mortgage will re-adjust based on the terms set forth in the initial note. The fixed interest rate allows buyers to refinance and lock in a similar monthly payment for the life of the loan.

Interest Rate or Monthly Payment: The most common reason to refinance is to lower your interest rate or drop mortgage insurance and in turn lower your monthly payment. For example, if you are five years into an existing 30-year mortgage and refinance for a brand new 30-year fixed loan, you are able to re-set the time clock back to 30 years. This extends the amount of time you have to pay off your loan and will possibly lower your monthly payments. If you have sufficient equity in your home you may also be able to refinance out of your current loan program that may have mortgage insurance.

Shorter Term to Amortize the Loan Faster: Some homeowners use the lower interest rates to pay down their mortgages faster. A basic example would be a homeowner with 20-25 years left to pay on a 30-year mortgage. By refinancing, they can move to a 15-year fixed rate or 20 year with usually only a modest change in their monthly payment. This would allow the homeowner to pay off their loan in a shorter time frame and lower the amount of interest they will pay overall.

Equity: Homeowners may want to use the equity that they have accumulated based on improving home values and do a cash out refinance. This money can be used for many things, from paying off other debt to doing home improvements.
Take some time and talk to a mortgage professional to figure out the best option for you. Some things you should think about are:
– Credit score (at least 620 or higher)
– Steady income for at least the past 6 months to 2 years
– Amount of equity in your home (at least 20% preferably)
– Will this make significant change?
– How long do you plan on staying in the home?

New Fannie Mae loan changes on the horizon could affect you! If you’ve recently had a short sale or deed-in-lieu of foreclosure (DIL) and are looking to purchase a home again, here’s what you need to know:
Fannie Mae announced that on August 16th of this year there will be changes to regulations. For several years now, Fannie Mae has allowed buyers that previously were involved in a pre-foreclosure hardship (short sale, or deed in lieu), to buy again using Conventional financing in as little as 24 months with a 20% down payment and a minimum 680 credit score.
After August 16th, this early purchase programs is being retired, and replaced with longer waiting period, but with much less strict down payment and credit score requirements. Buyers that experience a short sale or deed in lieu of foreclosure are able to buy again using Conventional financing after a four (4) year waiting period.
From what we understand, it appears that after the four (4) years from a short sale or deed in lieu, that you can qualify using the standard Conventional qualifying requirements of a minimum 620 credit score, and 5% down payment.
Exceptions: If a homeowner can prove that the short sale was due to an extenuating circumstance such as job loss and can provide strong documentation, then the waiting period may still be reduced to two years.
There are still options other than conventional conforming programs to assist buyers purchasing a home prior to 4 years. FHA & VA financing have shorter waiting periods; 3 years for FHA financing and 2 years for VA. Also, there are portfolio products available where a time limit does not exist but terms of that type of a loan are significantly less favorable than previously described programs.
If you have questions or comments, please feel free to contact me. Visit http://www.cobaltmortgage.com/ingridquinn or email me at Ingrid.quinn@cobaltmortgage.com.

One of the greatest advantages of working with a local lender is that they are better able to communicate with you.

We live in the age of technology and making use of the newest developments is important in any business, but nothing can replace a good face to face conversation. I maintain an open door policy with my clients. Day or night I am available. I personally get to know each of my borrowers and can update them within moments on their loan status and what, if anything is required. Accessibility is an important ingredient for success.

Another advantage of a local mortgage professional is knowledge of the local market.
When you use a local lender, they have expert knowledge of the local market. Why would you use a lender that doesn’t know your area? There are intricacies to the mortgage process that are very area specific; it’s very difficult for a national lender to know all of them for every state. Every area of the country has regional differences, when it comes to closing home loans and purchasing real estate.

Finally, your local mortgage lender will likely be connected to the other professionals involved in the purchase or refinance.

There are many different aspects to a home purchase or refinance. The major people involved are the borrower(s), the lender, the real estate agent, and the title company and inspection professionals. When you work with a local lender, you will receive help navigating the process. By knowing the ins and outs of each part of the process, a local lender is able to keep things on schedule, identify issues and communicate more effectively each step of the way.

Qualified Mortgage (QM) and Ability to Repay rules are in effect on loan applications received on or after January 10, 2014. Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the new rules are designed to protect buyers from purchasing homes they can’t afford and provide lenders protection from liability when originating loans that meet the Qualified Mortgage standard.What is a Qualified Mortgage?

A qualified mortgage is a home loan that has:
• Regular periodic payments in substantially equal amounts
• Been underwritten based on a fully amortizing payment schedule using the maximum rate allowable for the first five years after the date of the first periodic payment
• Verified the borrower’s income and assets; and current debts, including alimony and child support
• A borrower’s total debt-to-income ratio of no more than 43% (see “Temporary QM” for exceptions to this requirement)
• Met points and fees limitations
• None of the following features: negative-amortization, interest-only or balloon-payment features

Points and Fees

A loan must not exceed the limits listed below for points and fees for either Temporary or Standard Qualified Mortgages. These fees typically do not include those that are paid to third parties such as appraisers or title companies unless those companies are affiliated with the lender.

Higher-Priced Mortgage Loans

For a lender to originate a Qualified Mortgage with safe harbor legal protections, the lender must ensure that the Annual Percentage Rate (APR) does not exceed certain thresholds. For 1st lien mortgage loans, the APR cannot exceed an index called the Average Prime Offered Rate (APOR) by more than 1.5%. For 2nd lien mortgage loans, the APR cannot exceed the APOR by more than 3.5%. FHA APR cannot exceed APOR +1.15% + annual NI%.

What does the Qualified Mortgage mean for you and your buyers?

Most loan programs today already adhere to the standards that make up the QM rule. The new rule simply formalizes that lenders must make – and document – a good-faith determination before closing the loan that the borrower has a reasonable Ability to Repay the loan. At minimum, this determination is made based on eight factors, which are already the tenets of mortgage underwriting:
• Current income or assets
• Current employment status
• Monthly mortgage payment
• Monthly payment on any simultaneous loan
• Monthly payment for mortgage-related obligations (taxes, insurance, HOA, etc.)
• Current debt obligations, alimony and child support
• Monthly debt-to-income ratio and residual income
• Credit history

There will not be a significant impact for loans that are eligible for Fannie Mae, Freddie Mac, FHA, VA or USDA. Although some jumbo and non-conforming programs will tighten their standards to the 43% debt-to-income threshold, most customers using these programs will still qualify.

The points and fees limitations and higher-priced mortgage loan limits are generally seen as a positive for homebuyers, as they will prevent many lenders from charging high ancillary fees, large amounts of discount points, and higher interest rates. However, there will be a small amount of riskier loan products that will be difficult to offer without violating the QM thresholds. Some lenders may decide to offer those mortgage products that are not eligible for QM safe harbor legal protection, but doing so will expose them to greater legal risks.

I have recently come across loan pre-qualifications where a 1st and 2nd combination mortgage loan option may be the right solution for a client. One main reason that a client may wish to separate their total mortgage amount into two loans; avoiding P.M.I. (private mortgage insurance). Many lenders including Cobalt Mortgage offer these types of loan scenarios when buying a home. Use of the combination of a 1st mortgage and 2nd mortgage is when the total amount to be borrowed is to be separated in to two loans. This is typically done with the first mortgage being within conforming loan guidelines (loan amount depending on location of the home) and a secondary retail or private loan being is set up for the remaining amount. A conforming (Fannie Mae or Freddie Mac) first mortgage will typically have more favorable interest rates than a non-conforming loan. Second mortgages can be taken in typically 2 forms, as a Home Equity Line of Credit (HELOC) or a fixed rate mortgage.
PMI or Private Mortgage Insurance is required by Fannie Mae and Freddie Mac as well as most investors when a 20% down payment is not made. Private mortgage insurance is paid to protect the lender against loss if a borrower defaults on a loan. Some borrowers choose to use a 1st and 2nd mortgage loan option when they have money for a down payment; however it is not enough to meet the 20% requirement. I have discussed P.M.I. in detail in my previous blog “P.M.I. vs. M.I.P. What’s the Difference?” (Please feel free to visit that blog for further information on that subject) PMI may also be tax deductible for some clients but for those who it is not, may want the 2nd mortgage for the purpose of having tax deductible interest.
It is best to discuss your options with your mortgage lender and your tax professional for guidance on the options right for you. For questions or suggestions please feel free to contact me at Ingrid.Quinn@CobaltMortgage.com or visit me at http://www.ScottsdaleMortgageExpert.com or http://www.CobaltMortgage.com/IngridQuinn .

It’s been a 30 year ride for me in this business. I thought it was time to reflect where the industry has been and where it may go. It certainly is not a boring job. I find it an exciting challenge to daily talk to people and work with them towards their goal of buying a home.

The industry has been in the news a lot in the last 7-8 years and there has not been a dull moment. There have been a lot of changes in the rules and just keeping up with those has been a huge undertaking, but it just takes me back to when I first started out. We verify everything. It’s the way it should be.

I have been through real estate booms and busts, trends come and go and so do people I have worked with. The industry has done some weeding out and hopefully most of the bad apples are gone and hopefully industry standards are where they should be.

What remains the same is that Americans still want to own their homes. I find that people place an enormous amount of trust in my hands and I do everything I can to make their homeownership goal a reality. What has changed, though, is the difference about how a mortgage is originated. The online channel has grown and the mortgage industry has finally automated the process to an almost paperless process. Yea!! Gone are the file folders of 3-8 inch thick loan files and pdf versions of documents loaded into our processing system has make copying and faxing a near thing of the past.

What I still feel is important is the relationship of the quality referral to an experienced and trusted lender. Though online access is readily available, the referral to your mortgage lender is important because they are handling all of your personal information and the trust factor is imperative as to who has your information.